14 Pros and Cons of Outsourcing ASC Billing

Written by Laura Dyrda | May 30, 2012 | Print  |

There are benefits and drawbacks to every decision ASC administrators make, including the decision about whether to outsource billing and collections. Here, industry experts discuss the pros and of outsourcing revenue cycle management.


1. Vendors are liable for coding mistakes. Surgery centers around the country are dealing with RAC audits, a new anxiety for many administrators. When auditors find a mistake, in-house billing departments are responsible and it could mean costly penalties. However, when the surgery center outsources billing and coding, the vendor is responsible for any mistakes their coders make.

"If there are mistakes in a claim and the surgery center outsources billing, the mistake doesn't show any ill intent on the ASC because they didn't do it," says Kelly Grier, vice president of business operations for ASD Management. "If you want to keep the billing in-house, you have to create a test with questions related to billing, collections and insurance carrier knowledge that is indicative of your area. You have to test your staff about billing and collections and hold them accountable to ASC billing standards."

2. Reduce your overhead.
If you are unable to sustain a billing and collections department — whether because the staff are inexperienced or lack of space — you'll reduce overhead by eliminating that position. However, you're also picking up the expense of outsourcing. Depending on the vendor's rates and their ability to capture reimbursement for your center, the trade off can be beneficial.

"You have to know the billing is being done appropriately," says Ms. Grier. Set benchmarks for the outsourcing company and track their progress monthly.

3. There is always someone available to work on your claims.
In-house billing departments are often small when surgery centers can sustain them, which means there isn't room for anyone on staff to take a vacation. When coding staff do take time off, other surgery center employees who already have full responsibilities must pick up the slack. However, when you outsource billing and collections, the vendor has enough personnel to keep someone on your claims at all times.

"If one of the vendor's employees is out sick, there are so many other people who can watch your account," says Ms. Grier. "You don't have that luxury with in-house billing."

4. Personnel are updated on regulation and coding changes.
Payor and government regulations for medical service billing are constantly changing, and with CPT codes updated annually it's important for coders to continue their education. Maintaining the appropriate level of knowledge about new codes and regulations can be difficult for a single coder or small coding department, especially if they have other responsibilities with the ASC as well.

Employees of an outsourcing vendor concentrate on billing and coding all day and are proficient in updates and changes as they occur. "When you outsource billing, there isn't a need anymore to keep up with regulations from an insurance and government standpoint," says Kevin McDonald, vice president of SourceMedical.

5. Vendors can run appeals.
When claims are denied, your vendor should be able to run appeals for you if they disagree with the insurance company's decision. "Our billing and collections company conducts appeals all the way up to the administrative judge level," says Michael Pankey, RN, administrator of Ambulatory Surgery Center of Spartanburg (S.C.). "They should be able to do that for you. When I ran my own office, we never appealed at that level."

6. Coders are always focused on the revenue cycle.
Surgery centers are often lean organizations, so employees must wear many hats. In some situations, administrators might pull in-house coders to work at the front desk for a day or two when the regular front desk employee is sick. Pulling from the billing department to fill a gap elsewhere becomes detrimental to your revenue cycle.

"You should never pull billers out of their department, but sometimes it happens," says Mr. Pankey. "You can't do it when they aren't in-office, so they are always focused on collections."

7. You only pay for the cases performed.
When you outsource billing services, the vendors often sign contracts to receive a percentage of the surgery center's revenue, which relies upon the number of cases performed at the center. "The biggest advantage of outsourcing billing services for an ASC is that it turns the fixed expenses associated with in-house billing into a variable cost of using a billing company," says Andrew Schrage, editor of Money Crashers. "The fees of an external billing company are based on how much cash they collect, so if revenues decrease, billing fees do as well."

If the surgery center has an in-house billing department, the employees are often paid a salary regardless of whether the center's case volume is up or down for that month.

"When case volume is fluctuating, sometimes it's on the negative side, and when you are paying for a percentage of net collections you are only paying for what you use," says Mr. McDonald.

8. Enhanced focus on patients.
If surgery centers outsource billing functions, they can spend more time ensuring patient satisfaction because they are spending less time with the revenue cycle. "Outsourcing the billing services of an ASC allows the center to focus more on patients, and staff members will be more productive since they will not be expected to take on the secondary role of helping out or assisting the billing department," says Mr. Schrage.


9. Loss of control.
When you outsource the billing department, you lose control over that branch of your practice. "You don't directly employ the billing staff any longer," says Mr. McDonald. This loss can be partially remedied by asking for weekly progress reports so you can track the impact they are making on your revenue cycle. They should be adhering to established ASC benchmarks, such as keeping A/R under 90 days, to make sure the surgery center is getting paid.

"It's important to ask for a weekly progress report so that the BOM can review the quality of the work performed by the billing service by examining the payments received versus the date of service," says Ms. Grier. "New monies [should be] off of clean claims and old monies [should be] off of aged A/R."

10. No onsite personnel.
Some physician partners may prefer to have billing and coding professionals onsite to build a relationship with them. In this case, it's crucial to plan for an in-house billing department during planning and construction of the ASC. "You can't walk across the hall to ask a question — you have to pickup the phone or send an e-mail," says Mr. McDonald.

It’s easier to find and resolve issues when the billing department is in-house, and the department staff can serve as physician educators if there is an issue with documentation. "One of the biggest benefits of having an in-house billing department is when there is a problem, usually it is found and resolved quickly," says Raemarie Jimenez, director of education for AAPC. "Additionally, when the quality of documentation from providers is an issue, surgery centers can bring in their in-house billing staff to educate physicians about documentation issues. This is taking a proactive approach to help reimbursement on the back end."

In some cases, outsourcing companies will down-code a procedure that isn’t documented correctly, which can lead to huge losses in revenue overtime. "If there is someone who is there to give guidance to the physicians onsite, I think it could help" Ms. Jimenez says.

11. Transparency may be an issue.
If the outsourcing company doesn't have the same software or electronic system as your surgery center, their actions won't be transparent. "There are companies that do the billing on different software from their clients so administrators can't see what they are doing," says Mr. McDonald. "Our company uses the same software as our clients so they know what we've done."

It's important to have transparency between the vendor and surgery center so administrators can monitor the vendor's actions and progress.

12. It can be expensive.
Outsourcing billing and collections services is expensive and for some low volume surgery centers, it doesn't make sense to send out claims. Instead, an in-house billing department will suffice, if the right people are in charge. "The surgery centers who are low volume or single specialty aren't good candidates for outsourcing their billing department because it can be pricy," says Ms. Grier.

13. Low dollar claims may not receive adequate treatment.
If you outsource the billing functions, particularly if the contract pays the company a percentage of the revenue gathered on each claim, account managers may pursue low dollar claims less aggressively than high dollar claims. The company always processes all claims, but some are more likely to pursue denials on high dollar accounts than low dollar accounts, which could make an impact on the surgery center’s bottom line.

"Some companies might focus on high dollar accounts and won’t be as aggressive with low dollar procedures," says Ms. Jimenez. "The company must have a plan in place to collect on every claim."

To avoid this situation, surgery centers can build a compensation model that includes a percentage of collections as well as percentage of accounts collected on. Know their process for dealing with denied claims and whether they audit internally and externally to make sure they aren’t leaving any claims behind.

14. There may be staff cuts.
If you take your billing services away from the in-house department, there will likely be staff cuts. "The primary negative aspect of outsourcing is that it results in staff cuts and can thereby raise the unemployment rate," says Mr. Schrage. "Unless the billing staff can be retrained to perform in other areas of the center, they are typically let go."

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